Coworking + Profit

“Designing your product for monetization first, and people second will probably leave you with neither.”

Just recently, Chris and I were talking about the growing tension on the Coworking list between profit and community – a tension that shouldn’t be happening…especially so early in the game. Coworking is really about paving new ground right now. It’s setting forth to create something different. When we started out spreading the word about coworking, we didn’t have the idea to turn any of our spaces into a business. The idea was to be able to create a space where we could work amongst other web workers like in a coffee shop, but without the pressure to buy more coffee and with the ability to meet with clients, etc. and brainstorm now and then. If it was to be our living room, like Amit Gupta created with Jelly in NYC, then so be it! But the point (for us, anyway) was to get OUT of our living room and separate some of that live/work stuff.

I’m currently reading a book on the study of Social Capital and within it, each one of the sociology theorists agree, networks of people are formed through benefiting the individual first, which then positively effects the wider community, creating strong connections and abilities to collaborate, etc. through these networks. We struggled with our initial foray into coworking at Teh Space (now The Hat Factory) as we assumed everyone wanted to be part of it as a benefit to the whole community. Hell, even we didn’t go often enough because it wasn’t convenient.

So, when we started Citizen Space, we knew we would have to approach it differently. We couldn’t assume everyone would join because they wanted to see the local coworking space thrive. There would have to be something in it for them…BEYOND a place to work, BEYOND reliable wifi, BEYOND the lack of being pestered to buy coffee. So we poured our heart and souls into creating a space that would be great for people, offered it for free for those who just wanted to drop in so that desk owners would get the benefit of interesting people dropping by, involved the desk owners in everything to feel as if the space is theirs, worked hard at bringing in interesting events and offering a nice, equipped space where people can work and socialize to their hearts content, etc. And still, we have days and sometimes weeks where we have sparse attendance in the office. Why? Because it is still more convenient for many web workers to either work out of their home office or their local coffee shop. It turns out that those in our space who are there most often are quite dedicated to the idea of community…we attracted awesome people to our space because of the way we were approaching it.

And we visited the lovely Sandbox Suites the other night for their grande opening. It’s a nice space and conveniently located. They have put alot of work into making it everything that people need. Lots of meeting spaces, white boards, a T1 line, mobile, open desks as well as more privacy orientated work stations, lots of comfy sitting areas, coffee, etc. AND they are opening every day of the week from, like 7 a.m. – 6 p.m. (M-F) 10 a.m. – 6 p.m. (S-S) That’s dedication. Yet, as Sasha told me, they are still struggling for people to come by regularly. They have smatterings of people here and there, but the bulk of people are STILL filling up the coffee shops, fighting for tables, etc. The same issue is happening with Berkeley Coworking and many others, including Citizen Space of late (it’s been very slow). Even as coffee shops are getting frustrated and covering outlets, choking the wifi and putting limitations on time, people choose to go there instead of a coworking space. They are choosing to go to a place that can be hostile to web workers rather to one that is warm and welcoming…why is that?

And there we are on the coworking list talking about being for profit? We keep going back and forth on business models and arguing over how for-profit to be. Sure, go ahead, but as many of us who are GIVING IT AWAY FOR FREE* aren’t even meeting the needs of the people we want to attract, I think profit is a long ways down the line.

And, no, we don’t have rich parents or sponsors. I don’t know anyone on the list with that sort of connection. We have hard-earned money (or huge amassed debt) and a dream. We want affordable, convenient spaces that allow for collaboration, openness and community…and many of us believe that this should be done in a way that respects the environment (sustainability). And, yes, we also want to be ‘sustainable’ in the way that we don’t have to close our doors in 6 months time.

We should start looking at coffee shops closer. What is it about them that serves people so well? Is it the lack of having to commit? The regular hours? The ambient intimacy? The rotating variety of people? We all recognize the downside of coffee shop working: loud, forced coffee consumption, cramped tables, etc. but when we think about coffee shops, do we feel a natural revulsion? Me? Nope. It sounds nice. I actually need to go to one every now and then and feel the energy.

Are these discussions putting monetization before people? I don’t know. Maybe we’re just being practical…inclusive…open… That’s all well and fine, but my fear is that if we go down that path, we will end up with neither.

12 Comments

I’ll +1 this. I was trying to start a coworking center in Saint Paul, MN, but we approached it as a profitable enterprise. After all, although my wife and I would like something like that, it was going to take a whole lot of work to get things set up, and we wanted some kind of return for that investment.

But one of the things I’ve discovered is that Coworking as a profit-making enterprise just doesn’t work, at least not if your primary market is freelancers and telecommuters. The reality of the situation is that freelancers want a baseline that is more than they’re willing to pay for, so it’s going to fall apart.

I think another factor might be the individual preferences for a la carte vs subcription payments. The latter takes commitment 🙂 as well as owning up to the true total cost of your own usage patterns. I’m sure I’m not the only one that has a Netflix account sucking up money every month regardless of whether I’ve actually been active lately and if you add up enough expenses like that, it’s death by a thousand tiny cuts and you get gunshy about yet another recurring expense. This is inherently non-rational – you probably spend more on coffee every month than you would on a coworking membership!

Thanks Miss Rougue for all your thoughts. Its great to read about how ya’ll think and FEEL. (not sure why I haven’t joined in the google group debate on this topic…)

Like others I am trying to get a Coworking space going as a for profit venture. Sustainability is important to me. But my heart is in to create a cool community. I do it for people. So to make it my full time job to nurture this community I look for a stable business model with real cash flow. Balance between community and profit is my main goal. I don’t want to become rich. I love where I live and the people in it too much to put profit before people. 🙂

Thinking out loud here… maybe the primary revenue stream for Coworking spaces should be something other than membership fees. Is it coffee? Big company anchor tenants? Something else? Maybe Coworking should be based on a freemium and ads based business model like so many web 2.0 companies?

I understand the goal. I was giving my reaction after looking at a few of the referenced web sites, descriptions, and pricing. There is an image reaction problem. You want it to feel like a cafe that is suitable for working. But my quick emotional reaction was “an office”.

That is part of why it is not filling up. I’m not sure what it is about the web sites that made me react that way, but it was a very definite immediate reaction.

It’s interesting that the other coworking spaces are seeing a slow-down as well. Do you think it makes more sense to create a collaboration with coffee shops, similar to what you and Chris were trying to do with Ritual? Perhaps there is some other element we haven’t hit on yet to make coworking spaces sustainable in the long run — membership generation seems to be the hardest part. Should it be predominantly a coffee shop, but it might have a nice side room that is a bit quieter, like areas of a library, plus lockers that are fairly large to store items? I know for me I didn’t like the overall commitment of the coworking space — I wanted to be able to go when I wanted and not feel guilty when I didn’t. I’m sure there is some magic key that when found will create a sustainable organizational/business model — many new concepts and businesses have to iterate a bunch of different forms until a sustainable one is found, its just that we only tend to hear the final succesful one so we don’t see the intermediate forms. If you guys ever want to brainstorm on this we can grab some grub — I’ve been wanting to meetup anyway and see how you and Chris are doing.

Coffee shops must be very profitable — what exactly makes them profitable? Is it that they are fairly cheap to run, and coffee has a large profit attached to it? If the coffee+coworking idea is to be pursued, it would need to be a business since you don’t tend to see non-profit coffee shops (though the Marsh coffee shop in San Francisco on Valencia is a kind of non-profit coffee shop, since it is attached to the Marsh Theatre next door).

Try setting up a place for free and sell stuff that people really need, like coffee (just make a pot and charge $1 a cup), snacks (25¢ Little Debbie’s and granola bars for 50¢), hot meals (Cup-O-Noodles for $1, maybe even cook meals and charge a buck or two per portion), and the stuff people are making (do a 50%/50% split with the house). I’ll be doing this if I can ever afford a place…

Maybe it’s as simple as the coffee? We’re trying to price low enough ($110/month) that we can be an almost invisible cost, but also that we have a lotta casual dropins, creating the sorta buzz and vibrancy from continual turnover of the people in the space each day.

I think the opportunity is for companies that have space & resources already in their core business, to make space available during their absolute downtimes, and work on an Referral, Advertising & business networking model.

Some businesses suit this others wouldn’t, but either way it would be the space owner that would need to drive it and offer low/no-commitment, low/no-cost to potential coworkers.

Fairly likely though that it’s human nature on all sides:
WiFm = What’s in it for me? For the Service provider & provider of facilities
VS’s
the profile of the average ‘coworker’ = usually an independent contractor/ freelancer/ telecommuter etc.

Not a match is my gut feel. Not unless one of the latter has the capacity to be the Service Provider!